Striking off a company’s name is a simplified method for ceasing its operations. The Registrar of Companies (ROC) has the authority to issue a notice to remove a company’s name from the Register of Companies for specific reasons. Additionally, a company can request the ROC to strike off its name voluntarily.
Sections 248 to 252 of the Companies Act, 2013, outline the process for striking off a company’s name, whether initiated by the ROC or the company itself. This approach is used to close a non-functional company quickly and is one of the most straightforward methods for dissolution.
Voluntary Application for Strike Off
A company can voluntarily apply to have its name struck off by passing a special resolution or obtaining approval from 75% of its shareholders, based on paid-up capital. This application can be made to the ROC after clearing all liabilities, under the following conditions:
- The company has not started operations within one year of incorporation.
- The company has been inactive for the last two financial years without applying for dormant company status under Section 455 of the Act.
Once the company submits an application to the ROC, a public notice will be issued according to the provisions of the Companies Act.
Restrictions on Filing for Strike Off
A company cannot apply for striking off if, in the last three months, it:
- Disposed of any property or rights for profit during normal business operations.
- Changed its registered office from one state to another or altered its name.
- Filed an application with the National Company Law Tribunal (NCLT) for an arrangement or compromise, which is still pending.
- Engaged in activities other than what is necessary for filing the application or meeting statutory requirements.
- Is undergoing winding-up proceedings under Chapter XX of the Companies Act, whether initiated by the Tribunal or voluntarily.
If a company submits an application in violation of these restrictions, it may face a fine of up to Rs. 1 lakh.
ROC-Initiated Strike Off
The ROC can initiate the strike-off process by sending a notice to the company and its directors if:
- The company has failed to commence business within one year of incorporation.
- The company has been inactive for the last two financial years and has not applied for dormant status under Section 455.
The ROC will request the company’s response, along with relevant documents, within 30 days of issuing the notice.
When the Registrar of Companies (ROC) strikes off a company, the directors of the company will be disqualified from holding the position of director in any other company for a minimum period of five years, effective from the date of such disqualification.
Strike Off Procedure
Once the ROC issues a notice or receives a voluntary application for striking off, it will publish the details in the Official Gazette. After the expiration of the notice period, if no objections are raised, the company’s name will be removed from the Register of Companies.
Following the removal, a dissolution notice will be published in the Official Gazette, officially dissolving the company. Before the final strike-off, the ROC ensures all liabilities are settled, and any amounts due to the company are realized. The ROC may also obtain undertakings from company officers to confirm this.
Even after dissolution, the company’s assets remain available for settling its liabilities. The responsibilities of the company’s officers, including directors and managers, continue as if the company had not been dissolved. For any queries, contact us.
Effect of Dissolution
Once the company is dissolved under Section 248, as notified in the Official Gazette, it ceases to function from the date mentioned in the notice. The Certificate of Incorporation will be considered void from that date, although it remains valid for settling liabilities and obligations.
Appeal Against Dissolution
Anyone affected by the ROC’s order to dissolve a company can appeal to the Tribunal within three years. The Tribunal may restore the company’s name if it finds that the ROC’s decision was unjustified. All relevant parties, including the ROC and the company, will be given a chance to present their case.
After receiving the Tribunal’s order, the company must file it with the ROC within 30 days. Upon doing so, the ROC will restore the company’s name in the Register of Companies and issue a fresh Certificate of Incorporation.
Additionally, the ROC can request the Tribunal to restore a company’s name if it was removed based on inaccurate or misleading information. This application must be made within three years of the dissolution date.
Restoration of Company by ROC
In cases where the ROC discovers that a company’s name was removed from the Register of Companies due to incorrect or false information provided by the company or its directors, the ROC has the authority to approach the Tribunal for restoration. This application for restoration must be made within three years from the date of the company’s dissolution order.
Once the Tribunal reviews the case, it may pass an order for the restoration of the company’s name, provided that the removal was unjustified. Upon the issuance of such an order, the ROC will restore the company’s name in the Register of Companies and reissue its Certificate of Incorporation.
Effect of Restoration
When the Tribunal restores a company’s name to the Register of Companies, the company is effectively treated as though it was never dissolved. All rights, obligations, and liabilities of the company, its directors, and shareholders are reinstated as before.
The restored company can resume its operations as usual, and any legal proceedings that were in progress before the dissolution can continue as if there was no break in the company’s existence.
Final Thoughts
The process of striking off a company’s name is a straightforward way to close a defunct company. Both the ROC and the company itself can initiate this process under specific conditions outlined in the Companies Act, 2013. However, companies must carefully follow the regulations and ensure that all liabilities are settled before applying for a strike off to avoid penalties or legal consequences.
Additionally, if a company is wrongfully dissolved, there are provisions in place for appealing to the Tribunal for restoration. The ability to restore a company ensures that no unjust actions are taken against legitimate businesses, providing a balanced system for both company closure and recovery.
By understanding the strike-off process, companies can ensure compliance with legal requirements and make informed decisions about their business closure or continuation.
FAQs on Application for Strike Off of a Company
1. What does it mean to strike off a company?
Striking off a company refers to the removal of its name from the Register of Companies. This is a process that either the company can initiate voluntarily, or the Registrar of Companies (ROC) can initiate if the company is no longer operating or has failed to meet certain requirements. Once the company is struck off, it is considered dissolved and ceases to exist as a legal entity.
2. Can any company apply for strike off?
Not all companies can apply for strike off. To be eligible, the company must meet certain conditions such as having no outstanding liabilities and not having carried out business activities for the last two financial years. There are also restrictions if the company has undergone recent changes, like moving its registered office or transferring property.
3. What is the procedure for voluntarily striking off a company?
A company can voluntarily apply for strike off by passing a special resolution or obtaining the consent of 75% of its shareholders. The company must also ensure that all its liabilities are cleared before applying. After submitting the application to the ROC, the ROC will issue a public notice and, if no objections are raised, the company’s name will be removed from the Register of Companies.
4. What are the grounds for the ROC to strike off a company?
The ROC can strike off a company if it has failed to commence business within one year of incorporation or has not been active for the last two financial years without filing for dormant status. In such cases, the ROC sends a notice to the company and provides 30 days for the company to respond.
5. What happens to a company’s liabilities after it is struck off?
Even after a company is struck off, its liabilities do not disappear. The company’s assets can still be used to pay off its debts, and the directors, managers, and other officers remain liable for any outstanding obligations. The dissolution does not absolve the company of its financial responsibilities.
6. Can a dissolved company be restored?
Yes, a dissolved company can be restored. If any individual feels that the strike off was unjustified, they can file an appeal to the Tribunal within three years of the dissolution. The ROC can also apply for restoration if it believes that the company’s name was struck off based on incorrect or misleading information.
7. What is the time limit for appealing a company’s strike-off?
The time limit to appeal against the ROC’s decision to strike off a company is three years from the date of the ROC’s dissolution order. The appeal must be made to the National Company Law Tribunal (NCLT).
8. What happens once a company is restored by the Tribunal?
If the Tribunal restores a company, it is treated as if it was never struck off. This means the company’s legal standing, rights, and obligations are reinstated, and it can resume operations. The ROC will also reissue a fresh Certificate of Incorporation upon restoration.
9. Can the ROC refuse a company’s strike-off application?
Yes, the ROC can refuse a company’s strike-off application if the company fails to meet the conditions for striking off, such as having unresolved liabilities, conducting business within the last two financial years, or violating the restrictions on disposal of assets or changes in its registered office.
10. How long does it take for the ROC to strike off a company after receiving the application?
The process usually takes around 3-6 months. After the application is submitted, the ROC will issue a public notice, allowing time for objections. If no objections are raised and all conditions are met, the ROC will proceed to strike off the company.
